U.S. Faces Setback in Asia if TPP Trade Deal Doesn’t Pass

Oba​ma administration has painted Pacific pact as counterweight to the rise of China

President Barack Obama, center, flanked by Secretary of State John Kerry, left, and National Security Adviser Susan Rice, holds official talks with Vietnam Prime Minister Nguyen Xuan Phuc in Hanoi in May. PHOTO: HOANG DINH NAM/AGENCE FRANCE-PRESSE/GETTY IMAGES

President Barack Obama’s troubled Pacific-region trade deal is threatening to become a foreign policy failure in Asia, where the U.S. loaded the accord with strategic significance as a counterweight to the rise of China.

U.S. officials have billed the 12-nation Trans-Pacific Partnership for years as central to a shift of U.S. military and other resources to Asia. Now, with opposition toward the pact mounting on both the right and left in Washington, the likelihood of its ratification in Congress appears bleak.

Failure at this point, experts say, would dent U.S. credibility on everything from trade to its commitment to a region where U.S. might has underpinned security since World War II.

“For the simple reason that the U.S. invested so much in it, the deal acquired a kind of totalistic value that goes way beyond its economic merits,” said Euan Graham, a former U.K. foreign officer who studies regional security at the Lowy Institute for International Policy in Sydney. “To leave Asian partners hanging now would be disastrous for U.S. leadership in the region.”

The administration continues to hold out hope for the TPP’s passage. “We’re a vote away from either cementing our leadership in the region or handing the keys of the castle to China,” said U.S. Trade Representative Mike Froman.

But that argument hasn’t helped solidify backing in Congress, where the pact is opposed by most Democrats and now lacks the support of key Republican lawmakers who have championed the TPP and other trade pacts for years. Both major presidential candidates also have attacked the deal.

Last week, GOP Sen. Pat Toomey, former president of the Club for Growth, a bastion of free-market economics, came out against the TPP in a bid to win working-class voters in his close Pennsylvania re-election race.

At the same time, Democratic presidential candidate Hillary Clinton,who has said she opposes the pact in its current form, is under increasing pressure from the left to make a clean break with the deal, which she supported while serving as Mr. Obama’s secretary of state.

The U.S. “pivot” to Asia, unveiled in 2011, reflected concern about China’s bid to turn economic might into hard power in a region with growing importance. Tensions have risen, with China testing U.S. military dominance by making claims on the South China Sea and protesting a U.S. antimissile installation in South Korea.

The proposed pact, which was finalized last year, would cut or reduce some 18,000 tariffs for a group of Pacific Rim nations in the Americas, Asia and Oceania—an area accounting for 40% of the global economy.

China, not part of the Trans-Pacific deal, is negotiating a separate Asia pact without the U.S. China is also pledging more regional loans through a new bank and a $40 billion Silk Road fund.

Many trade experts say the Obama administration is exaggerating when it depicts the deal as a make-or-break moment for whether the U.S. or China writes the rules of global trade. The China-backed accord doesn’t create new trade frameworks: It is a run-of-the mill, tariff-cutting exercise, and less ambitious than the TPP. The two pacts aren’t mutually exclusive. Asian nations always intended to join both.

But freighting the TPP accord with geopolitical implications has raised its stakes. “For America’s friends and partners, ratifying [the trade pact] is a litmus test for your credibility and seriousness of purpose,” Singapore Prime Minister Lee Hsien Loong said in Washington this month. Observers saw Mr. Lee as speaking for the other Asian signatories: Japan, Vietnam, Malaysia and Brunei, with Indonesia, South Korea and others considering it.

To be sure, the U.S. is deeply integrated with Asia through big trade relationships with China and other economies, as well as defense treaties with nations such as Japan, South Korea and the Philippines. Such U.S. ties to Asia are unlikely to change, regardless of the trade pact’s fate, many experts say.

But Asian leaders who spent political capital to support the pact will be less likely to do so again if it fizzles, experts say. Smaller countries that balance relationships with both China and the U.S. may doubt the U.S. and become accommodating to Beijing.

“Obama went around convincing countries to do things as part of an effort to show that we can stand up to China in some way,” said Yukon Huang, a former World Bank chief for China and senior associate at the Carnegie Endowment for International Peace. “But now if it doesn’t pass, they will take a much more skeptical approach.”

Take Vietnam, seen as the pact’s big winner, with an estimated 11% boost to its economy by 2025. Four decades after fighting a war, the U.S. and Vietnam are becoming closer amid shared concerns over China’s expansion in the South China Sea, waters Vietnam also claims. This year, the U.S. lifted a ban on lethal weapons sales to Vietnam. The Communist nation got special exceptions to join the pact.

“We still hope that Obama will be able to ratify the deal during his last months in office,” said Luong Van Tu, Vietnam’s former deputy trade minister.

But no one has more at stake than Shinzō Abe, the prime minister of Japan, the closest U.S. ally in the region. Mr. Abe made the pact central to his domestic and foreign strategies—and faced significant opposition from Japan’s powerful farm lobby and other local interests to do it.

Mr. Abe’s “Abenomics” plan to pull the world’s third-largest economy from its long morass relies on the pact as a driver of growth and reform. On the international stage, the deal is also key to Mr. Abe’s broader strategy to contain China by organizing East Asian nations under an umbrella of U.S. economic influence.

Shinzo Abe, Japan's prime minister, shown at his official residence in Tokyo in August, has been a strong backer of the TPP trade deal. PHOTO: AKIO KON/BLOOMBERG NEWS

Shinzo Abe, Japan's prime minister, shown at his official residence in Tokyo in August, has been a strong backer of the TPP trade deal. PHOTO: AKIO KON/BLOOMBERG NEWS

If the TPP fails, “there will be a very negative impact from the viewpoint of economic security,” said Yorizumi Watanabe, a former Japanese trade official and professor at Keio University in Tokyo.

The Pacific deal was less of a strategic play when talks began under President George W. Bush. China even considered joining. That changed as China sent more outwardly aggressive signals and the Obama administration adopted it as an economic anchor for a beefed-up Asia strategy.

Ironically, the deal is stumbling now because it became too much about foreign policy and not enough about economic benefits, according to Michael R. Wessel, a member of the congressional U.S.-China Economic and Security Review Commission.

“The argument shifted very early from jobs to the need to support foreign policy goals in the region,” said Mr. Wessel, who has worked for many Democrats, as well as with labor unions that have long opposed trade deals. “Well, the American worker was sick and tired of giving up jobs for foreign policy goals.”

The Wall Street Journal (wsj.com) — William Mauldin, Chieko Tsuneoka and Vu Trong Khanh contributed to this article.